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Monday, August 8, 2011

Spotify Is A Hit So Far

Spotify logo image from Bobby Owsinski's Music 3.0 blog
Despite some different numbers from different sources, it looks like Spotify has found an audience, at least in the early going. While Billboardbiz.com estimates that the music service, which launched on July 14th, has amassed at least one million total users in just three weeks, AppData claims the total is closer to 2.1 million total users.

Either of these are impressive stats, but the most important figure is 70,000. That's the number of paying subscribers to Spotify after only the first week that it was available in the US.

Some see paid subscription like this as the savior of the music biz, while others see it as just another boulder pulling it down. On the one hand, if there are enough paid subscribers, the music business could be considered healthy again. A round number thrown about is 100 million at $10 per month, which comes out to $12 billion a year. While this might be great for the major labels, it's yet to be determined just how much of that the artists, publishers, and indies will see. If history holds true, it will be a pittance as always.

Spotify expects to have 50 million users in the US within an year. How many of those will be subscribers? If today's numbers stay on course that only amounts to 3.5 million users, well below projected 100 million. Then again, if Apple supplements its soon to be launched iCloud with some sort of streaming subscription service, those numbers just may be within reach.

Once again, this is still probably not great news for the artist, since the streaming royalty rate is so small ($.0012 - or about a tenth of a cent per stream) that an artist with a giant hit may only expect enough money to buy a nice dinner, if that. Another example of Music 3.0, and why an artist's supplemental income is so important.
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2 comments:

Chris de Palmer said...

I wrote a white paper entitled “Music 2.0 business model” about the impact of streaming services on the revenues of the music industry players, either artists or labels.

Based on pricing levels of downloads & streaming services and on contractual rights defined between players, a business case study has been done to define the number of downloads or streams needed and the number of true fans required to expect different levels of revenues for each player and how these revenues will evolve with a growing fan base.

The conclusion is that the revenues generated by audio streaming paid services are far from being negligible and are a real complementary revenue opportunity offered to the music industry; it was demonstrated that 3 years would be needed with the same true fan base to come-up with similar revenues, comparing both download & streaming digital services: 10 000 true fans either consuming an average of 23 streams (or plays) a month based on a an 0.0125 euros cost per stream or downloading one 9.99 euro LP will generate in 3 years around 48 000 euros revenues for a label, 55 000 euros revenues for an independent artist, 7000 / 8 000 euros revenues for a singer/songwriter or 3000 / 4000 euros revenues for a songwriter.

This white paper is available free of charge on http://palmrocksongs.com/publications

Stian said...

Hi Bobby. I wanted to share an interesting fact with you.

In a recent post you wrote that Lady Gaga`s payout from Spotify (or was it streaming in general) was a lousy 119$ for a period with millions of plays on the streaming sites.
I released a single with a friend on Spotify and iTunes via CDBaby.com and our first "paycheck" showed us a total of 4000 plays in a two month period, and the payout for this was 40$.

This seems to tell us that an unsigned artist will be payed a total of 1 cent per play, while a big label artist will be paid 0.001 cents per play. (Because the labels hog the profit).

If this is true than it seems like spotify and other streaming sites are not all that bad for us unsigned artists.

What do you think?

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